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How to Maximize Profits by Cutting Down on Running Costs in Businesses



Business is all about profit. If you are not making enough profit in your business then you are probably doing something wrong. There’s a whole pool of reasons that would make your profits go down but we want to focus on one very crucial factor which is mostly overlooked- running costs.

How to Maximize Profits by Cutting Down on Running Costs in Businesses

How to Maximize Profits by Cutting Down on Running Costs in Businesses

Running cost is the money that you allocate to things like salaries for your employees, paying rent for your workplace or even fuel for the commute. There are also a bit more complex things like electricity bills, transport of goods and taxes that come under running costs. There are quite a few ways which can help you to reduce these costs. Let’s have a look at them.

How to Maximize Profits in Business?

Hire Smart

Probably the most overlooked factor when it comes to managing the running costs of your operation is the rate of employees leaving the firm. It may not be your fault at all sometimes when your employee decides to resign from the company. Whatever the reason may be, whenever an employee leaves, you have to start looking for a new one and train him or her. Training takes up a lot of time, energy and money. Simply training your HR team to do some research on the applicants for a new post can help you figure out how long the applicant is really going to stay with your company. People who have been changing companies or have a bad past record should be simply left out unless you find them to be productive for your company. Even after the training an employee can give problems and reduce the efficiency of the whole team. Even in such a  situation, a background check and smart hiring skills would have helped you out.  

Calculative Investments

Any type of investment for your company can be considered as running costs. Whenever a machine breaks down, you would have to repair or replace it which is again considered a running cost. Investing smartly would include you doing just a tad bit more research on some things that you invest in so that they do not give you any trouble after purchase. Consider buying quality products which will last and actually make your work easier. Spending money on frequent repairs and replacements can easily burn a hole in your pocket. Also, keep in mind that calculative investment works the other way round too, so keep yourself alert and aware.


Technology has helped people achieve wonders. Making use of technology the right way can help you in overcoming a lot of problems too. When it comes to cutting cost then businessmen are at the forefront of using technology for it. When the industrial revolution came, a lot of businessmen started replacing manual labor with machines. Machines take only a one-time installation and purchase costs with some maintenance. It is just a lot cheaper than paying salaries to people every month. Also, the margin of error is almost nil when it comes to machines. Using automation is a very popular way of reducing costs.

Go Green

Converting to green energy might sound very far fetched and even expensive but it is quite the contrary. If you consider your yearly electricity bill payments and compare it to green-energy commercial lights then you would realize that solar energy can save you a lot of money in the long run. Also, you should consider recycling your waste ad somehow trying to use it in other processes. This would save you some costs of procuring raw materials or you could even try to sell the waste to negate the costs of buying something new. Other tactics to save running costs through environmentally friendly tactics is to push your employees into carpooling or opt for the company shuttle. This would enable you to save up on the commute allowance and directly reduce the running cost.

Self Reliance

A lot of running costs of a lot of business go into the purchase of raw materials which can sometimes create hurdles in your budgeting tactics. A lot of companies are now realizing the benefits of self-reliance. They are setting up practices to make their own raw material in an economical way. If you succeed to even make 20% of the raw material yourself then you would see the contrasting difference in the running costs. Of course, you need to be very careful with the calculations and also consider the long term benefits before jumping to conclusions.


Outsourcing may seem to be contradicting the self-reliant approach but then at times allocating your work to other companies does come out to be cheaper. If a part of your business is labor-intensive and can be outsourced, then you should probably do some research on the costs of allocating your work to companies overseas. A lot of MNCs have successfully outsourced most of their customer support centers to Asian countries which pans out to be much cheaper. This is a very efficient way to reduce running costs if you can work out the logistics.


Taxes are the hidden costs of almost every practice that involves the exchange of money. Taxes aren’t a very simple concept and in today’s date, a person can very simply get confused while paying taxes. Companies with various processes have a very complex taxing system which can be harrowing even for a chartered accountant. Make sure that you have the best-chartered accountant handling your taxes. An experienced one can help save you loads of tax money with the correct methods. 

Business is a very lucrative thing. Applying the right ideas and methods can help you do wonders. Saving up on your running costs is a very basic way of increasing your profit margin but it’s easier said than done. One needs to be well aware and connected with the working of the various parts of his business to be able to efficiently cut costs. Following the aforementioned pointers can act as an effective guide to easily reduce the cost of running of any business.

Karan Bhardwaj, Founder of Geeknism worked as a Digital Marketer since 2012 and has expertise in Tech Niche. You can follow him on Facebook and Twitter.

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